RBI keeps key policy rates unchanged

The Reserve Bank of India (RBI) left key interest rates unchanged in its first bi-monthly monetary policy review Tuesday.

The repo rate or the interest that banks pay when they borrow money from the RBI to meet their short-term fund requirements, has been left unchanged at 8 percent, while the reverse repo rate, or the interest that the RBI pays to commercial banks when they park their surplus short-term funds with the central bank, has been adjusted to 7 percent.

The Cash Reserve Ratio (CRR) is left unchanged at 4 percent.

The central bank’s action is on the expected lines as most analysts predicted a status quo considering the macro-economic data and inflation.

“The only thing that is surprising in the monetary policy today is lack of surprise,” Governor Raghuram Rajan said while announcing the policy statement.

Rajan said the central bank’s policy is firmly focused on curbing inflation.

“The Reserve Bank’s policy stance will be firmly focussed on keeping the economy on a disinflationary glide path that is intended to hit 8 percent CPI inflation by January 2015 and 6 percent by January 2016,” the governor said. C{I stands for the consumer price index.

“At the current juncture, it is appropriate to hold the policy rate, while allowing the rate increases undertaken during September 2013-January 2014 to work their way through the economy, he said.

“Furthermore, if inflation continues along the intended glide path, further policy tightening in the near term is not anticipated at this juncture,” the bank governor added.